Posted in : Absolutely Meaningless Comedy, HfSResearch.com Homepage

For all of you waiting on tenterhooks for our 2013 predictions, I am afraid we have some bad news: today, we took the unprecedented step of canceling them.  But why?  Can’t analysts see into the future anymore?

We predict… there'll be a lot of rubbish predictions

1) Analysts who claim to see the future, without any real data to support their theories, are very, very likely to be talking gibberish.  They are either:

a) Talking out of their behinds;

b) In love with their own verbocity and have lost their grip on reality; or

c) Both of the above.

This time, HfS will base its outlook on the data gleaned from our 2013 State of Outsourcing study, which will include the views, experiences, dynamics and intentions of hundreds of enterprise buyers, providers and consultants.

2) Predictions from “experts” are nearly always wrong and many are just ill-informed rubbish. Not only that, nothing is more off-putting than reading someone’s predictions that are just plain wacky, for example, Jason Krieser of law firm K&L Gates views a bright future for the service integrator model. What?  We were talking about this a decade ago.  Moreover, the article is claiming the fact that the State of Texas is “one of the first IT organizations to give it a go”.  When did the State of Texas become a barometer for the future of IT Outsourcing and innovation?  And while we’re having a laugh at predictions based on very shaky evidence, Steve Martin of outsourcing consultancy Pace Harmon, claims we’re in for a major “backsourcing splash” next year simply because Randy Mott fancies stirring things up at GM (which is easy to do when your boss is Barack Obama).  How can you base an industry trend on the actions of an auto manufacturer which only recently survived on bail out money from the government?

3) Our economy is teetering over a precipice in 12 days’ time… won’t that have some impact on proceedings?  In case any of you have been in a coma all year, if Congress can’t figure out a way to even start paying off its $16 trillion debt over the next few days, we could be heading into a sharp recession.  Most likely, they’ll come up with come temporary band-aid measure, but our economy is in serious debt and we haven’t even come up with an initial plan to save it and reverse our horrible addiction to debt.  Now, the outcome of the end of year Fiscal Cliff deadline could create an incredible burning platform for outsourcing deals to be signed… or it could prolong the painful do nothing, change nothing holding-pattern much of industry has been persisting with since 2008.  It all depends on what kind of deal (if any) Congress can concoct.

So we, at HfS, predict absolutely nothing, except that we’ll all get probably get extremely drunk next Tuesday, Wednesday and maybe Thursday…

Posted in : Absolutely Meaningless Comedy, Business Process Outsourcing (BPO), HfSResearch.com Homepage, IT Outsourcing / IT Services

And just when you’d forgotten we hadn’t published the final installment of our interview with Genpact’s CEO NV “Tiger” Tyagarajan… here’s the final installment of our interview with Genpact’s CEO NV “Tiger” Tyagarajan.

The more you understand your processes, the better you can redesign them. Better processes produce better data. Better data gives better insights. The better your insights, the smarter you run the company and the smarter the decisions you make. It becomes a virtuous cycle.

NV “Tiger” Tyagarajan, President and CEO of Genpact, 2012

Phil Fersht (CEO, HfS Research): Tiger, there’s been a lot of talk lately of changing the image and even the terminology of BPO. Do you think it matters who we are perceived as and what we call ourselves?

NV “Tiger” Tyagarajan is President and CEO, Genpact (click for bio)

NV “Tiger” Tyagarajan (CEO, Genpact): I think it matters a lot. Five years back we created the terminology business process management. In all our corporate communications we have never used the word BPO. We have always used the terminology business process management and technology services company to describe ourselves. It was tough to get everyone else in the industry—other providers, the press, analysts, advisors, employees—to use terminology other than BPO.

Now, finally, driven by the economy, the whole industry is jumping there. We always believed the business we are in is really two businesses:

• I am going to help you run your company better. It will be more efficient and effective. It will produce better output. I will take you on that journey. First, we fix your processes and then we bring in technology.
• They make decisions every point along the way. Do I invest here or there? Do I accept this customer or that one? Do I price like this or that? Should I take that risk or not? Our job is to help companies make better, smarter decisions. We do that using two aspects:

Data. There’s so much data coming out you can use it to build insights to make smarter decisions. Make it more predictive so companies can make those decisions before it’s needed.

Processes. How do you redesign your processes to make smarter decisions around how the process should run?

The more you understand your processes, the better you can redesign them. Better processes produce better data. Better data gives better insights. The better your insights, the smarter you run the company and the smarter the decisions you make. It becomes a virtuous cycle.

We have seen that happen with long-term relationships. We think this is what our industry should be known for.

Clients have to have that vision. If they don’t, they are stuck in transactional, easy stuff. They also have no expectation other than dollars per hour.

The second reason this is important is: How do you attract the best talent? If people think this industry is nothing but drudgery work, you are not going to attract the best and brightest in the world. Clearly, talent is going to be a big question mark in the long run. So, how do you become the best attractor of talent? You have to make your company an exciting place to work. That’s how you drive intellectual capital. We have to create role models people can follow.

Phil: Tiger – it’s been great catching up again – I am sure the HfS community,  have really appreciated reading your insights.

NV “Tiger” Tyagarajan (pictured) is Chief Executive Officer for Genpact.  You can view his full bio by clicking here

Click here to read the whole interview

Posted in : Business Process Outsourcing (BPO), Finance and Accounting, HfSResearch.com Homepage, Outsourcing Heros, Sourcing Best Practises

Just outsource them all…

The recent post entitled “Can we ever get back to the thinking workforce” focused on the poor work habits that have infiltrated many of today’s workers to create a dearth of analytical thinkers for our organizations.  However, one critical aspect we overlooked during the excellent discussions, was centered on how our corporate managers have allowed this to happen.

As if by magic, I was presented with a new survey carried out by Kelton Research, on behalf of  talent management SaaS provider, Cornerstone OnDemand, which canvassed views of 494 employed Americans over the age of 18.  It’s clear that the very attitude and approach towards talent management has shifted radically in recent years.

What stands out for me are five main aspects:

1) Managers are not being developed or trained property to nurture and develop our talent;

2) Over half of employees today are taking a short-term view of their current employment;

3) HR has become a forgotten function in the business when it comes to aligning employee performance with objectives;

4) Corporate leaders are losing interest in developing their own talent, and looking for “silver bullet” hires;

5) This short-term attitude towards talent management is surely increasing the value proposition of partnering with sourcing providers.  If they can fill your talent gaps quickly and inexpensively, then why bother developing your own?

So let’s take a closer look…

While employees still, by and large, know how their jobs contribute to the business objectives (56%), barely a third feel their performance goals are aligned with their organizations’ objectives, or are managed or trained adequately.

Question: Are managers simply too busy to devote time to their staff, and are many not being trained in the art of developing their employees’ careers?  And – even more importantly – do many corporate leaders even care?

While more than half the respondents do not view their future with their current employer for longer than a three-year period,  it’s clear the main reason for this is a lack of skilled managerial talent which can motivate and mentor their staff.  Almost half of today’s employees would take a longer view of their current organizational career track, if their manager showed them sufficient development, attention and appreciation.

Question: Employees want to be managed well, so why are so many asking for it?  Have companies forgotten the art of good staff management?  Or have many simply have lost interest in developing their staff?

The Bottom-line:  The “career employee” culture is clearly on the wane, opening the door for deeper sourcing relationships

While we can bemoan the poor progress in talent development, for which an alarming portion of the US corporate sector is now responsible, I believe there is a deeper message in all of this:  not all firms are “dropping the ball”, they simply do not have a vested interest in the future development of many staff, and their management layer doesn’t have the time to train junior staff.  Many have taken the attitude that they can replace poor performers with high-performers, if need be.  Moreover, many are also viewing their sourcing relationships as opportunities to downsize their current workforces (such as the recent Citigroup announcement).

The data also signifies that many organizations are probably already too ill-equipped to become superlative talent development environments, especially in functions that do not create a great deal of competitive advantage for the business… so maybe it’s time for them to look at new ways to manage business functions.  While we haven’t witnessed a rapid burst of outsourcing activity since 2008, it doesn’t mean business aren’t re-aligning their resources and readying for it in the future.  This data suggests they may well be.

Posted in : Business Process Outsourcing (BPO), HfSResearch.com Homepage, IT Outsourcing / IT Services, kpo-analytics, SaaS, PaaS, IaaS and BPaaS, Social Networking, Talent in Sourcing

Whether you buy, sell, advise or analyze outsourcing services, YOUR opinion is critical for our annual State of Outsourcing study as we crowdsource the industry’s opinions and dynamics.

This will take no more than 12 minutes to complete, where you can receive an executive report of the survey findings and participate in a prize draw for an iPad Mini. Please note that we will treat all personal data with the strictest confidence.

Your experiences and views are so important to us – and personally appreciated!  Please click on the following link to add your insight:

Posted in : Business Process Outsourcing (BPO), HfSResearch.com Homepage, IT Outsourcing / IT Services, the-industry-speaks

Just when you thought it may be safe to give up a couple of days of your life to get to know a service provider better, with, maybe, a 10% reduction in slide bombardment (if you’re lucky), one of the Indian majors has added a whole new dimension to the sales cheese game…

"Did someone say innovation?"

Fly in anyone with a pulse (literally) to receive the bombardment. Suddenly, they don’t really care who they’re talking to anymore… they just want butts on seats.

As an industry analyst, I need to devote a good amount of my time with service providers to learn more about their businesses and attempt to decipher what makes them different (if anything) from others.  In addition, it’s important to meet their leaderships to challenge their business models and relay what their clients and prospects are saying about them.  Most of the time, these discussions can be held privately in briefings, but once (or twice) a year, some of them beg me to attend an event of theirs so I can absorb multiplous hours of their posturing, pitching and pontification.

And sometimes these actually turn out to be educative experiences with two-way dialog and a chance to meet some new people.  However, I tend to keep my expectations at the floor level, as many of these experiences frequently end in boredom and bemusement that they are pitching the same stuff that was in vogue a decade ago, and depression as all the kingsize rooms were divvied out to the Gartner analysts.

But now enter the new “whack-a-mole” marketing strategy.  Fill the room with suits… and who gives a damn!

This week, my suspicions of this new strategy were initially raised, when I inadvertently showed up late at a lovely airport hotel, where I quickly registered and slipped quietly into the ballroom to join the proceedings.  The room was wall-to-wall packed… there was nowhere to sit, so I sheepishly hid in the corner at the back of the room for a while, with the vein hope some nice helper would slip me a chair.  It didn’t happen…

Then followed lunch, when again, there must have been 20% over-capacity with the butts:seats ratio.  Anyway, once that fiasco was endured, we were all rapidly shepherded into our break-out sessions for more PowerPoint proliferation and it was business as usual, as the laptops all came out and the vast majority of the attendees absorbed themselves in whatever they do when their laptops are on, and the provider executives proceed to read off their endless decks.

These days, we’re used to some providers mixing up their audience with analysts and a few reputable advisors, but this was a whole new experience.  Here’s the breakdown of characters:

• Advisors who were actually unemployed;
• Even more advisors who were on the bench and openly complaining about the “lack of deals”;
• Advisors who worked for boutiques even I had never head of (and were probably unemployed);
• Any “analyst” based locally in Boston who was trying to figure out whether they had anything in common with the provider’s business (I even bumped into one who was covering renewable energy).  Several were spotted slinking our of the exits after lunch;
• Analysts who were once gainfully  unemployed and still attended any vendor event under the sun, still holding out hope that the good old days were soon returning and one of the big shops would miraculously rehire them;
• A handful of analysts and advisors whose coverage and client engagement was relevant to the provider in question.

And here is an educated guestimate break-down of these characters at the whack-a-mole show:

The Bottom-line:  The butts-on-seats model may work with the outsourcing model, but not influencer marketing

The provider in question has a strong reputation for its aggressive pricing and determination to win new client logos.  What baffles me is the ROI with its marketing focus.  Why not pick out the 20-30 folks from the audience who actually care about services who talk to clients and stop wasting time with everyone on their spam list who has nothing better to do than show up at these things?  We estimate that barely a fifth of this audience actually had some relevance to the provider’s business and future growth potential.

If you focus on those relevant influencers who actually understand the industry and are involved with real buyer clients on a daily basis, then you’re going to have a more intimate and educative experience for all.  However, if you lump those who matter in with those who really don’t (many of whom waste everyone’s time asking stupid questions), then you’re going to lose the real influencer’s attention and probably their attendance at future events.

It’s time for some of these providers to wake up and start engaging influencers properly – this type of approach has little ROI and the net result likely to be negative.

Posted in : Business Process Outsourcing (BPO), HfSResearch.com Homepage, IT Outsourcing / IT Services, Outsourcing Advisors, Outsourcing Events, Social Networking

For a long while now, I have privately been concerned about the negative impact modern work culture is having on the disintegration of work ethics within many of today’s firms.  Many workers, whose jobs once forced them to think and focus, have today become reactive, easily-distracted and operational.  

It first dawned on me about a decade ago, when I was enjoying one of those rare “in between jobs” periods, that I was still able to spend my whole day absorbed in front of my laptop.  Let’s be brutally honest here – people think they are “at work” as long as they are sitting in front of their computer screen.  Peoples’ obsessions with their favorite news pages, blogs, social sites and their 3+ email accounts has disintegrated work productivity for so many.

Too many office staff today have lost their focus and analytical value to their firms

How many people reading this blog are able to turn off their email for at least an hour, so they can focus on whatever work activity they need to finish?  How many workers have become mentally lazy, preferring the cerebral chewing gum of short-term attention span theater than actually having to read, learn and think?  How many people have evolved from problem-solvers to passive information jockeys, doing little more than responding to emails, passing on instructions, or forwarding along information someone else produced… with little (or no) value added by themselves? And how are you supposed to focus on being good at your job when you can’t concentrate on any one activity for more than five minutes, being  expected to respond to emails as soon as you receive them?

I believe it is this culture of poor productivity, of reactive corporate political environments, that has resulted in operational business functions becoming, frankly, much too operational and failing to add real analytical value to their organizations’ leaderships.  And while this may not seem like a big deal today, you only have to look at some recent workforce data from the McKinsey Global Institute, to understand how much trouble our businesses are going to be in, if many of our office workers fail to improve their analytical skills.  According to McKinsey’s research,  US firms are already short 200,000 data scientists per year, while we will have an excess of 300,000 office support staff by 2020:

This is a wake-up call for staff worried about being “one of the 300,000”

The net result is that many of today’s businesses are over-bloated with operational staff whose modus operandi is about maintaining the status quo, as opposed to exploring new ways to advance the business.  The very nature that many businesses feel the need to hire “data scientists  to improve their own self-awareness and strategic direction just about sums this up; they are essentially admitting defeat in improving the analytical and innovative capabilities of their own personnel, and are looking elsewhere to re-ignite their business fortunes.

However, it’s the existing personnel within a company which knows its business the best – the quirky institutional processes, the politics, the customers and suppliers etc. The keys to success are about forcing these people to open up their minds to work with real data to understand better how to streamline existing processes, to understand better their capabilities, to pinpoint where new consumer demand may be untapped, or where existing demand is going to dwindle… right across their supply chains.  As the McKinsey data shows, the data scientists simply aren’t going to be there to slot into these positions at some future moment (when it may be too late).  The really effective potential scientists are the ones busily managing their Facebook contacts, in between berating their providers for failing to bring any innovation to their procure-to-pay processes.

The Bottom-line:  Analytics providers can help re-orient the workforce to be more effective, but only if firms have the desire to change

This data is also a massive wakeup call to the sourcing industry:  organizations and analytics providers can work together to create stronger analytics based-relationships. This means not only training existing personnel to develop their own analytical personnel, but also re-orienting the work culture to re-focus the staff.  Providers can deliver armies of people with tools to add analytical capability, but they will only be effective if the provider’s resources can be utilized as an extension to the client’s team, as opposed to a factory of data gatherers.

Hence, partnering with providers can help get frustrated enterprises from A to C a lot quicker, bypassing much of their painful naval-gazing exercises, where they bemoan their lack of talent – and in a way that is far less expensive and risky than simply hiring “data scientists” who either do not exist, or are far too expensive for their meager budgets.

I truly believe  savvy partnering with providers can be really effective for a business seeking urgent and dramatic change to their very work culture.  “Outsourcing” (yes, I said it) strikes fear into the staff, and forces them to justify their very existence in a company.  It provides a trigger to force much-needed change into businesses.  “Outsourcing” gets a bad rap because it scares people worried about their jobs… hey , if you’re worried about being outsourced, then make yourself more valuable to your organization.  Employees need to get the message – and get it fast – if they don’t add analytical value to their organization, their own career opportunities are going to be limited.  It’s for their own good – only possessing tactical operational skills is only going to get them so far. Who wants to be part of the 300,000 excess?

Today, I have to confess to being impressed by the armies of analytics staff and tools that providers are pushing at their clients.  This is where the real change is occurring in business and is also providing the true differentiation points across the provider landscape.  If providers can prove they can bring genuine analytical skills to their clients, then that’s half the job done… the other half is their clients wanting to change and break out of this disturbing holding-pattern in which so many companies find themselves today.

Posted in : Business Process Outsourcing (BPO), Finance and Accounting, Global Business Services, HfSResearch.com Homepage, HR Outsourcing, HR Strategy, IT Outsourcing / IT Services, kpo-analytics, Social Networking, sourcing-change, Talent in Sourcing

Click to buy Brain Wreck on Amazon

It’s a nightmare that’s hard to contemplate. My good friend Becky Dennis, who’s worked in outsourcing for many years, was thousands of miles from home after delivering a pitch to a group of executives.

That success under her belt, she looked forward to the long trip home. Only thing is, a couple of hours later she forgot how to walk. It was too hard to talk. And she was struck by an odd series of neurological deficits that baffled her and a dozen doctors she’d eventually see over the course of 27 months.

But, as anyone who knows Becky would’ve predicted, she didn’t give up. So, here we are a few years later, and Becky is telling her remarkable story in Brain Wreck. It’s an honest, humorous account of her journey to restore her spirit and get to the bottom of her illness. I recommend it highly.

After marveling at the book, I was thrilled to have the chance to chat with Becky about her experiences.

Phil Fersht (HfS): Hi Becky – It’s so refreshing to have a good friend and colleague write such a personal book about their own life and experiences. Can you tell our readers what inspired you to put pen to paper?

Becky Dennis, author of Brain Wreck

Becky Dennis (Author, Brain Wreck):  In fact, there were quite a few events that inspired me , but one in particular I’ll mention here. After suffering a serious illness in 2008 that caused encephalitis (swelling of the brain), I went down a very long path of searching for a diagnosis that fit my symptoms — 27 months to be exact. I’m hopeful that by telling my story, it might help others who suffer from similar neurological challenges to get a faster diagnosis. Encephalitis is often misdiagnosed as stroke, MS, flu or complex migraine. If I can raise awareness, along with the efforts of others, of the short- and long-term effects of the illness, doctors might consider this diagnosis earlier in the process. Very few forms of encephalitis are treatable with medication, but the encephalitis caused by the herpes virus, which most adults carry in their systems (most often causing cold sores and mouth sores) CAN be treated with Acyclovir. If those patients don’t receive Acyclovir, 80 percent die within the first week of onset.

Most medical professionals have little insight into the patient’s experience beyond the acute phase (first month). I’m grateful that the book is already circulating among leading neurologists and medical professionals across the U.S. and UK thanks to a recent event hosted by a board I’m on, Encephalitis Global, Inc. Several of the doctors who presented at our event are getting the word out among the medical community so doctors can better understand the residual effects from this sometimes undetected, misdiagnosed illness.

Most causes of encephalitis, whether bacterial, viral or auto-immune, have no protocol for treatment or therapy in the U.S. Most patients, like I was, are seen in the acute phase, then left to fend for themselves. A handful of doctors are actively working with survivors like me, Encephalitis Global and the Encephalitis Society of the UK to establish protocols so that patients diagnosed with encephalitis have a more optimal recovery through a suggested path of treatments, therapies and medications. This can happen to anyone and of the survivors I’ve met, some have been lawyers, doctors and other business professionals. None of us are immune, so it makes awareness that more critical.

Phil: What are the key messages you want people to take away from the book?

Becky:  I’m hopeful that readers will be inspired to be their own advocate when it comes to rare illnesses, whether life-changing or not. Throughout my journey, I applied many strategies that I learned from my own career in outsourcing to work with the medical professionals I saw. One is that, even though someone is senior to you in the company, that colleague is not always right just because of their title. It is the same with doctors. Even though they have a medical degree, we have the option of questioning them. They don’t always have all the answers, and we must not accept a lack of answers as a closed door. They try hard, but getting multiple medical opinions is important. Find one who can help be an advocate with you in the absence of answers.

Also, dressing for the part is a trick I learned along the way. If I wore the formal business attire that I might wear to an important client meeting, doctors took me more seriously. The same effect occurred if I sent a cover letter in advance of an appointment to explain the purpose for my visit. This meant the doctor already knew my reason for being there and had given it some thought before my arrival. This made my appointments more effective, especially given a doctor’s limited time with each patient.

Additionally, very few forms of encephalitis are preventable, as seen in this year’s epidemic of the West Nile Virus in the U.S. However, for Japanese Encephalitis (JE) in Asia, which kills one in three people, a vaccination is available. I’m hopeful that more business travelers will consider their destination and inquire about the vaccinations available before traveling.

Phil: It is said that we all have one good book within us… So would you ever write another book?

Becky: You’re right, Phil. I think we all have a book in us. Everyone is so interesting in their different experiences. For me, writing has always been a passion. I definitely have others in my future, but I’m also quite focused on my career. I took time between jobs to be able to write this or otherwise I couldn’t have done both. I’m thankful that the outsourcing industry has taught me so many valuable skills that prepared me to actually survive this illness and document my journey. All of the companies I’ve worked for have offered leadership, writing, strategic planning and public speaking opportunities that have enabled me to tell the story and know how best to reach the influential medical professionals who are helping make my inspiration something that is “actionable.”

Phil: You’ve been a loyal follow of Horses for many years, is there anything else you’d like to share with our readers?

Becky: Keep a sense of humor. One of the things I like about HfS is that the content is practical and applicable. But one of the things I love is that it’s light hearted. We all work very hard and we need to balance the 24×7 demands with a sense of humor. Despite the hurdles from my illness and the demands of our industry, keeping it light is so important. And so is maintaining the right balance of family and career.

Thanks for the opportunity, Phil. I hope that readers will get at least one valuable nugget from this.

Phil:  Best of luck with the book, Becky – and congratulations on being the first outsourcing executive to write a book not about outsourcing 🙂

Posted in : HfSResearch.com Homepage, Outsourcing Heros

A subtle, but decisive, shift took place in the sourcing advisory landscape today, as Alsbridge’s announced the acquisition of leading telecoms/networking sourcing advisor, Telwares.  

This move firmly places Alsbridge as the main contender to ISG at the helm of the independent boutique advisor market, and follows Alsbridge’s acquisition of telecoms procurement outfit TAG, in early 2010, to place the Dallas-based firm as the lead advisor in telecoms and networking sourcing.

Ben Trowbridge is CEO, Alsbridge (click for bio)

This dovetails nicely with Albridge’s strengths in IT infrastructure sourcing consultancy and its overall competency in price-benchmarking.  As CEO Ben Trowbridge told us yesterday, “Transforming the network is right at the guts of Cloud computing.  This is where we intend to develop our expertise with the addition of Telwares”.

Why this matters

Loads of data.  Ben Trowbridge claims he now has 385,000 datapoints for networking procurement by adding Telwares to his existing data.

Decouples the RFP process from pricing  support.  If you ask a legacy advisor to run a telecom deal for you, their only likely solution would be to issue an RFP to the likes of AT&T and Verizon and play them off to get you some price-points.  Firstly, this will likely set you back a few hundred grand – and take weeks to complete.  Secondly, the pricing is often hard to standardize and can come in all sorts of funky formats.  If advisors can pull/model this data from their existing datapools, they are going to save clients a ton of time and money.

Caters for the wizening client.  Most IT and procurement leads are more accustomed and becoming increasingly proficient at running more of the sourcing process themselves.  They do not want to “crack a walnut with a sledgehammer” each time they need some data or advice.  Advisors such as Alsbridge are adapting and catering for their changing market, which is why they have continued to grow during the tough environment of recent years, while many of their competitors have dwindled, or disappeared altogether.

Positions Alsbridge as a mid-size consulting organization, ahead of the pack of minnows.  Telwares adds a further 60 consultants to the Alsbridge family, making it 175 in total, with sizeable revenues.  The firm can now set itself apart from the other boutiques in the space (all of whom are struggling to break $10m in annual revenues) and can stand up aggressively to ISG in bake-offs for enterprise business – especially in the IT infrastructure and telecoms/networking domains.

Where next for Alsbridge

You only need to take a quick glance at ISG’s stock price, which recently slumped by 20% to barely a dollar a share, to understand sourcing advisory is a commodotizing business.  The only way forward is to move beyond mere “RFP administration” and provide organizations with realtime data that is affordable, and does not take weeks to gather upon request.  In addition, it’s about helping clients move beyond their myopic obsession with cost to understand more about the business outcomes and realistic forms of innovation they can accomplish when sourcing their business and IT processes.

Ben Trowbridge and his primary business partner, Mort Meyerson, have clearly realized that acquisition is going to provide much of their future growth in the consulting space, and have  benefited well from picking up ProBenchmark, TAG, and Everest’s Outsourcing Center in recent years.  Telwares represents their largest venture yet.  The firm now has considerable scale and depth in the IT and telecoms domains – surely its next move has to be to bolster its presence in the process and business transformation strategy areas.

Posted in : Business Process Outsourcing (BPO), HfSResearch.com Homepage, IT Outsourcing / IT Services, Outsourcing Advisors, SaaS, PaaS, IaaS and BPaaS, Sourcing Best Practises

One of our great technology and business services firms is in real trouble 

If you want to read another diatribe of HP’s woes, its second colossal multi-billion dollar acquisition write-down of the year, its revolving-door or leadership with very different ideas, then you’ve come to the wrong place, as we see little point dredging up the past to bemoan HP’s current predicament.  And as a stark reminder of how quickly a great brand can disintegrate in the face of disruptive competition, just look at Sony, which was downgraded to junk status by Fitch.  HP could soon follow down Sony’s depressing path, if  a radical overhaul of its businesses doesn’t happen soon, as we have our own versions of Apple and Samsung turning the legacy enterprise services industry on its head.

It’s time to stop dwelling on the past and look to the future.  In today’s commodotizing market for IT and business services, HP’s services business can only really look to defend what it still has against the encroaching competitive bite of the likes of Accenture, Cognizant, Genpact, IBM, TCS etc.  Defending what you have is no solution in today’s market, or you’ll end up in the junk pile of other once-great brands such as the Sonys, the Nokias, the Unisyses…

However, there is one option that could revitalize its legacy:  merge with one of the market leaders.  Most great brands find new homes when the market conditions demand a change – and HP’s situation is no different.  But remember, services firms are very different beasts from product firms – and HP is also very, very big: noone’s going to buy the whole thing, so it has to sell off some of its portfolio businesses that can add real value to market competitors.

Assuming that HP’s true DNA is as a technology products innovator, the logical step is to strip off its services businesses, which are still profitable, with an immense portfolio of enterprise customers on long-term contracts, and a stellar pool of talent to service them.  However, wait too long, and these services business will continue this inexorable decline and much of its talent, whose CVs are currently flooding the marketplace, will have gone.

There are two jewels in HP’s services portfoilio – it’s SAP development services and BPO services businesses.  Let’s focus on its BPO services today…

Why acquiring HP’s BPO Services would propel several possible suitors into a market-leadership position

While HP’s BPO revenues have been slowly declining in recent years, it’s still likely to net $2.6bn in revenues this year – a similar size to that of Accenture, and only dwarfed by the two traditional BPO pure-plays: Xerox ($6.2 bn) and ADP ($10.5 bn) .  This BPO division includes a large global portfolio of horizontal services that incorporates a huge billion-dollar CRM BPO business inherited from its EDS acquisition, a solid finance and accounting business grounded on marquee clients such as P&G and Molson Coors, a large healthcare business of medicaid services supporting a multitude of US States, and a strong public sector presence in many countries.  In addition, HP has renowned SAP-enablement skills, servicing a multitude of enterprise clients processing their global payrolls and accounts on SAP.  There are a host of BPO providers which woud benefit significantly from HP’s global client portfolio, its onshore presence, and its client delivery talent.  Acquiring this business would potentially transform the fortunes of several providers currently scrambling to tackle the BPO space head-on.

So… which providers should seriously consider buying HP’s BPO business?

The main contenders

1) IBM:  Degree of fit: 9/10.  Likelihood of happening: 7/4.

IBM has demonstrated, with its recent bumper CEMEX deal, that is has the appetite to bounce-back from the high-profile loss of its British Petroleum F&A contract and re-assert itself at the helm of the BPO industry.  HP would be an obvious fit and would likely be a much less complex integration – both culturally and structurally, should such a merger occur.  The addition of HP would not only bolster IBM’s (already) strong public sector businesses, but place IBM at the forefront of CRM BPO – an area where IBM has clear ambitions.

IBM has the capital, management experience and track record to pull this off.  However, the larger issue here is that IBM would probably look to make a grander play to take on a larger portion (or all) of the HP IT services businesses, in addition to BPO.  It’s hard to see Big Blue not wanting to ingest HP’s application services business, if it’s going to absorb BPO. This is probably what would slow this down, as most of the incumbent services firms are still playing a “wait and see” game with HP to explore all feasible options.  Given IBM’s appetite to be either #1 or #2 in its chosen markets, HP would provide an obvious avenue for it to stamp its authority.

2) TCS:  Degree of fit: 8/10.  Likelihood of happening: 9/4.

A TCS-HP combo in services would make a potentially compelling and unique market proposition.  Should it occur, it would also represent the first major Cowboy/Indian services combination that we have been predicting for a couple of years’ now.

While TCS has performed admirably with its vertical BPO offerings, notably in banking and insurance, its has never really gotten its horizontal BPO business off the ground.  HP would give it immense horizontal capability, and a badly-needed front end of talent to work with clients and improve its notoriously weak sales and marketing capabilities.  TCS could claim a market leadership position in BPO with this acquisition – and it could probably raise the capital without too much difficultly.  It would also be refreshing to see one of the Indian services majors make a true global play in the space -and TCS is likely to be the most ready to pull something like this off, with its clear focus on hybrid IT-BPO services.

TCS has proven to be incredibly risk-averse with acquisitions over the years and is unlikely to change now, despite the obvious value this one would have for the firm’s ambitions.  However, it has proven it has the appetite to take on really large, complex assignments when it really wants to, and surely recognizes the value in what HP would bring to its table.  In addition, TCS is showing signs of starting to diversify some of its management control outside of India, and there’s nothing like a major acquisition to force through some much-needed change.  A move like this would also be a massive statement intent from the Indian services industry that its leading firms intend to become truly globalize their businesses.

3) Accenture:  Degree of fit: 6/10.  Likelihood of happening: 11/4.

Accenture has benefitted considerably from its consulting synergies and client relationships, and its unique ability to elephant-hunt major client deals is likely to see it break the $3 billion dollar barrier with its BPO business in the coming months. Today, it has the size and scale not to need to buy new client footprints, and has persisted with an effective “tuck-in” acquisition strategy in recent years, picking up the likes of Ariba’s managed services, Zenta, and, more recently, Octagon Research Solutions, to add industry domain expertise.

Accenture would likely consider picking up some of the client contracts from HP, but is unlikely to have the appetite to buy up its whole BPO pie.  There is simply too much duplication of resource and unneeded scale for this to make financial sense.  Moreover, HP’s strengths are largely in horizontal processes, as opposed to industry-specific domains, which is where Accenture has openly declared it wants to grow its business.

4) Cognizant:  Degree of fit: 7/10.  Likelihood of happening: 10/1.   

Cognizant has proven to be one of the smartest of the Indian-heritage firms when it comes to acquisitive growth and has savvy Stateside leadership unafraid to make bold moves to maintain its stellar growth trajectory.  The firm has shown appetite to grow its BPO business – in patches – by picking up UBS’ captive, CoreLogic and its recent ING deal, but has not shown much desire to muscle its way into horizontal process markets, such as F&A, procurement or CRM BPO.

Cog is more likely to cast its eyes over some of the HP app services business, however, it is likely going to be out of its price range.  In addition, Cognizant isn’t in a place, in its current market position today, where it needs to to anything radically different – this would represent too much of a risk for a firm which has worked to hard to get where it has so rapidly.

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